How Does Full Retirement Age Impact You?

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Full retirement age is already 70 and not 62, 65, or 67. This is the age when full retirement benefits kick in. Anything less than 70 and you receive a discounted amount of the full retirement benefit. Why 70? The government has determined this is the age when most people have stopped working. I wonder if companies with mandatory retirement ages know about this.

Don’t confuse full benefits with Full Retirement Age (FRA). The Social Security Administration (SSA) calculates FRA as 66 if you were born between 1943 and 1954. It moves FRA to 67 if you were born after 1960. But, you still have to wait to age 70 to receive the full amount of retirement benefits.

How tricky is this process? The SSA uses smoke and mirrors when it says you get 100% of benefits at age 66 and 132% of benefits if you wait to start taking payments until you reach age 70. Any way you slice it you do not receive full benefits until you are 70 and this number may continue to rise as more people live longer lives.

The 132% benefit is the SSA’s way of betting on mortality tables. If you could predict your death at age 75 you would be better off starting the benefit at age 66. If you live to be 80 or more you would be better off waiting to age 70. But, who can predict date of death? No one, but mortality tables use the laws of large numbers.

Also note that age 70 is within six months of the age (70.5) for taking mandatory distributions from your IRAs. It this another hidden message from the government? You should retire at age 70 when you receive maximum SSA payments and you are penalized if you don’t take distributions from your IRA? 70 is beginning to look a lot like the magic number for retirement planning.

Will this make sense for the millions of Baby Boomers who will not be able to afford retirement at any age? Probably not, but at least the intent of the government is becoming clearer. Don’t be shocked if the full retirement benefit age rises to 72 in the next couple of years.

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